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PIT_PIT [208]
1 year ago
15

Suppose your company needs $14 million to build a new assembly line. your target debt-equity ratio is 0.84. the flotation cost f

or new equity is 9.5 percent, but the floatation cost for debt is only 2.5 percent. what is the true cost of building the new assembly line after taking flotation costs into account?
Business
1 answer:
Leviafan [203]1 year ago
3 0

Suppose your company needs $14 million to build a new assembly line. your target debt-equity ratio is 0.84. the flotation cost for new equity is 9.5 percent, but the floatation cost for debt is only 2.5 percent. The amount required to build a new assembly line = is $ 14 million.

Equity represents the price that could be lower back to an agency's shareholders if all of the property has been liquidated and all of the business enterprise's debts were paid off. We also can consider equity as a diploma of residual possession in a company or asset after subtracting all debts related to that asset.

Equity is the possession of any asset after any liabilities associated with the asset are cleared. for example, in case you very own a vehicle well worth $25,000, but you owe $10,000 on that car, the car represents $15,000 fairness. it is the price or interest of the maximum junior magnificence of investors in assets.

In conclusion, stocks are referred to as equities because they constitute possession in organizations. They permit buyers advantage from boom but also have a chance while enterprise conditions weaken. In the subsequent time, we'll explore the variations between shares and bonds.

Debt equity ratio (debt/equity) = 0.84/1

Therefore total assets = debt + equity = 0.84 + 1 = 1.84

Flotation Cost Percentage formula = Weight of debt x Floataion Cost of debt + Weight of equity x Floataion Cost of equity

= (0.84 / 1.84) 2.5% + (1/1.84)9.5%

= 1.1413% + 5.1630%

= 6.3043%

Amount to be raised to purchase building = Cost of building / ( 1 - Total Floatation Cost Percentage)

= 14/(1-6.3043%)

= 14/0.9370

= 14.94 million

Learn  more about equity here brainly.com/question/26507171

#SPJ4

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Arcs and Triangles paid an annual dividend of $1.47 a share last month. The company is planning on paying $1.52, $1.60, and $1.6
77julia77 [94]

Answer:

The current market price per share is $14.82

Explanation:

The current price of the stock can be calculated using the DDM or dividend discount model. The DDM values the stock based on the present value of the expected future dividends from the stock.

The following is the formula for the price of the stock today,

P0 = D1 / (1+r)  +  D2 / (1+r)^2  + ... +  Dn / (1+r)^n  +  Terminal value

The terminal value is the cumulative value of all the future dividends calculated when the dividend growth becomes zero or constant. In case the dividend growth becomes zero, like in this case, the terminal value is calculated as follows,

Terminal value = Dividend / r

Where,

  • r is the required rate of return
  • Dividend is the dividend which will remain constant through out the future

So, the price of this stock today is,

P0 = 1.52 / (1+0.11)  +  1.60 / (1+0.11)^2  +  1.62 / (1+0.11)^3  +  

(1.65 / 0.11) / (1+0.11)^3

P0 = $14.82

4 0
3 years ago
Among the advantages of corporations are the ease of raising financial capital, professional management, and
aalyn [17]
I think the most appropriate answer would be B.


I hope it helped you!
8 0
3 years ago
Xiong Co. uses a periodic inventory system. Its records show the following for the month of May, in which 65 units were sold. Un
mezya [45]

Answer:

FIFO ending inventory  300 dollars

LIFO ending ivnentory  200 dollars

Explanation:

May-1 Inventory 30 units at $8 $  240

15 Purchases 25 units at $11     $  275

24 Purchases 35 units at $12    $ 420

  Total good available     90 units for a value of $935

We sale 65 units therefore, 25 units remains in our ending inventory.

FIFO will sale the first units leading the newest for inventory

So May 24th would be our ending inventory:

25 units x $12 = $300

LIFO will sale the newest and leave the oldest as inventory.

May 1st units are still at inventory according to LIFO

25 units x $8 = $200

7 0
3 years ago
A monopolist has four distinct groups of customers. Group A has an elasticity of demand of​ 0.2, B has an elasticity of demand o
Bumek [7]

Answer:  Group A

Explanation:

Price Elasticity of demand refers to the sensitivity of quantity demanded given a change in price. In other words, how much will quantity demanded change if price changes. Higher elastcities mean that when prices change, their quantity demanded changes more. For instance, an elasticity of demand of 2 means that when prices rise by 2%, demand will decrease by 4%.

The group that will be paying the most therefore will have to be the group that is least sensitive to paying that high price. That would be Group A. As they are not very sensitive to price changes with an elasticity of 0.2, the Monopoly can increase their price to a higher point than others knowing that they won't demand less goods.

5 0
3 years ago
Identify which accounts should be closed on May 31.
vaieri [72.5K]

Answer:

Cash   ___________________ Not Closed

Supplies _________________Not Closed

Prepaid Insurance _________ Not Closed

Land  ___________________Not Closed  

Buildings ________________Not Closed

Equipment _______________Not Closed

Accounts Payable _________ Not Closed

Unearned Rent Revenue ____Not Closed

Mortgage Payable _________Not Closed

Common Stock ___________Not Closed

Rent Revenue ____________Closed

Salaries and Wages Expense_Closed

Utilities Expense __________ Closed

Advertising Expense _______ Closed

Interest Expense __________ Closed

Insurance Expense _________Closed

Supplies Expense __________Closed

Depreciation Expense _______Closed  

Explanation:

In accounting, there are two types of accounts

  1. Temporary
  2. Permanent

Temporary

Temporary accounts are closed at the end of each accounting period and new balance are maintained for the new period.

Expense and Income accounts are temporary accounts and these accounts are closed in the retained earning account of the balance share.

In this question following accounts are temporary accounts and these are needed to be closed at the end of the period.

Rent Revenue  

Salaries and Wages Expense

Utilities Expense  

Advertising Expense

Interest Expense

Insurance Expense

Supplies Expense  

Depreciation Expense

Permanent Accounts

Permanent accounts are not closed at the end of each accounting period and they carried their net and accumulated balance in the next period.

Assets, Equity, and Liabilities accounts are permanent accounts.

In this question following accounts are permanent accounts

Cash    

Supplies  

Prepaid Insurance  

Land

Buildings  

Equipment  

Accounts Payable  

Unearned Rent Revenue  

Mortgage Payable  

Common Stock  

5 0
2 years ago
Read 2 more answers
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